Sunday, January 31, 2010

Investor Sentiment: I Am Surprised

From the highs three weeks ago to the lows of this past week, the S&P500 has slid about 7%. This is not as great as the mid- June to mid- July, 2009 swoon, which saw the S&P500 lose about 10%. So maybe investors are right in not being too concerned about the pace of the current downdraft, and when looking at the sentiment indicators this week, that is exactly what we see: complacency amongst the "dumb money" and indifference by the "smart money". Despite any short term gains over the next week, this still is not a high reward, low risk investing environment.

Friday, January 29, 2010

Short Yen, Long Dollar

The US Dollar should outperform the Japanese Yen, which is on the cusp of a secular down trend.

Morning News Notes: 1/29/2010

The "Morning News Notes" as prepared by TL...GDP, MSFT earnings, S&P500 technicals, and yesterday's performance by sector.

Thursday, January 28, 2010

Morning News Notes: 1/28/2010

The "Morning News Notes" as prepared by TL...earnings highlights, State of the Union, mortgages, Greece, and S&P500 technicals.

Wednesday, January 27, 2010

FXI: Lots Of Airspace Below

Figure 1 is a weekly chart of the i-Shares FTSE Xinshua/ China 25 (symbol: FXI).

To Start Your Day...1/27/2010

I am fortunate enough to have a good friend, TL, who sends me his excellently prepared "Morning News Notes" on a daily basis. He has graciously allowed me to reproduce them on the blog, and I hope to include this on a daily basis.

Tuesday, January 26, 2010

My Best Performing ETF

Sorry for the catchy headline, but the SPDR KBW Regional Bank ETF (symbol:KRE) has been my best performing ETF since I first highlighted the sector back on November 18, 2009. KRE is up about 16% since then while the S&P500 has remained flat.

To Start Your Day...1/26/2010

I am fortunate enough to have a good friend, TL, who sends me his excellently prepared "Morning News Notes" on a daily basis. He has graciously allowed me to reproduce them on the blog, and I hope to include this on a daily basis.

Key Price Levels: EEM

Figure 1 is a weekly chart of the i-Shares MSCI Emerging Market Index Fund. This is the third largest ETF in the market with $39 billion of assets.

Monday, January 25, 2010

Follow Up To EWJ and JOF

In the last 6 weeks, I have highlighted the i-Shares MSCI Japan Index Fund (symbol: EWJ) and the Japan Smaller Capitalization Fund (symbol: JOF). Since December 17, 2009, EWJ is up 4% while the S&P500 is essentially flat over that same time period. Since January 21, 2010, JOF is up a couple of percent in an otherwise crappy tape.

To Start Your Day...1/25/2010

I am fortunate enough to have a good friend, TL, who sends me his excellently prepared "Morning News Notes" on a daily basis. He has graciously allowed me to reproduce them on the blog, and I hope to include this on a daily basis.

Saturday, January 23, 2010

Investor Sentiment: Poorly Positioned

After notching a high earlier in the week for this rally that started in March, 2009, the S&P500 went on to lose over 5% in 3 trading days. This puts the S&P500 below the November 13, 2009 closing high. In the short term, "everyone" expects the proverbial bounce giving pause to bulls and bears alike, but make no mistake about it, investors remain poorly positioned to weather a sell off.

Friday, January 22, 2010

To Start Your Day....

I am fortunate enough to have a good friend, TL, who sends me his excellently prepared "Morning News Notes" on a daily basis. He has graciously allowed me to reproduce them on the blog, and I hope to include this on a daily basis.

Gee, I Wish I Sold Something, Anything!!!

Back on November 16, 2009 and December 1, 2009, I implored investors to sell something, anything. Why? In the absence of a crystal ball, there were technical signposts that were pointing to a market that was running out of momentum. Trust me, I don't have a crystal ball over here, but the high odds play - which is not always the right play - was to sell something, just anything.

Thursday, January 21, 2010

Rydex Market Timers: Update!

The Rydex market timers continue to serve as a good short term contrarian gauge to market action.

Stalking Japanese Small Cap ETF

From a technical perspective, I seem to be much more enamored these days with Japanese equities as opposed to US equities, which are highly overbought and over subscribed too.

Wednesday, January 20, 2010

Some Interesting Reading

Here are several articles that I have read over the last two days that I thought were noteworthy.

I Could Not Help Myself

Sorry, I couldn't help myself on this one. This will only be a momentary diversion as I know the markets can be fickle if one is not humble.

As A Corollary To A Higher Dollar....GLD, GDX, SLV

As a corollary to a higher Dollar, it is my expectation that precious metals will be under pressure.

Tuesday, January 19, 2010

Expecting the Dollar Index To Rise For 2010

In 2009, investors were down on the US Dollar, and anytime the US Dollar was down, everything else was up. But as we head into 2010, the US Dollar appears to have found support above the all time lows made around $70 in March, 2008 and reversed higher. There is reason to believe that from a technical perspective this reversal is for real, and it is real enough that it should have implications for other markets.

Sunday, January 17, 2010

Investor Sentiment: They Don't Ring A Bell At The Top

There are two kinds of bulls: 1) there are those bulls who are intent on squeezing every last percentage point from this rally and who believe they can find the exits when the music finally stops; and 2) then there are those bulls who continue to have high expectations that the current market environment will yield strong returns. The latter type of bulls are unlikely to realize strong gains without a significant pullback, and by significant I mean that the pullback should get investors to think that the market is rolling over to such a degree that the current cyclical highs will never be revisited. The former type of bulls are likely overestimating their ability to get to the exits or identify the top before the next trader. Either way, complacency reigns as they don't ring a bell at the top.

Friday, January 15, 2010

Inflation Pressures Moderating

The composite indicator that measures the trends in gold, crude oil, and yields on the 10 year Treasury has moderated and will end the week below the extreme zone. End of the week weakness in crude oil, gold and Treasury yields has caused the indicator to back off.

Technical Update On IEF And TLT

When we last looked at longer term Treasury yields, I stated that longer term Treasury yields were likely to undergo a secular trend change from down to up, but I had reservations because significant resistance was overhead, sentiment was too bullish for higher yields, and Treasury yields were greatly overbought. Honestly, last week I was not sure which way the bond market was going to go but I did offer up a game plan. This article will review the game plan that now has me more constructive on bonds or bearish on Treasury yields.

Thursday, January 14, 2010

Key Price Levels: SPY, DIA, QQQQ, and IWM

It has been many months since I have looked at the key price levels on the ETF's that represent the major market indices. This used to be a regular feature back in the early days of this rally. I have recently renewed my interest in this methodology of determining significant turning points as these key price levels tend to represent important areas of support and resistance.

Wednesday, January 13, 2010

Watch This Commodity in 2010

If there is one commodity that I believe will be worth watching in 2010, it will be natural gas. Natural gas has the technical characteristics of an asset poised for a secular trend change from down to up, and I believe the price action over the past 4 months has already confirmed that a trend change is underway.

Tuesday, January 12, 2010

Rydex Market Timers: A Long Term View

Rarely in this forum have we used the Rydex market timers to guide us in making that intermediate term trading decision. Typically, money flows in and out of their funds relatively easily, and this data set appears better suited for positioning oneself on a daily basis. However, a longer term (i.e., weekly view) has proved fruitful in the past, and this is what is presented in this article.

Monday, January 11, 2010

ETF's To Buy, Sell, or Hold

This is a follow up to the list of ETF's that I had presented with buy, hold or sell recommendations. See Table 1.

Saturday, January 9, 2010

Investor Sentiment: No Comment Needed

As you would expect, very little has changed with regards to investor sentiment. Therefore, no comments are necessary. In fact, sentiment has become so extreme and been this way for the better part of 6 months that sooner than later the market will correct, and the indicators will have regained their "predictive" value. It is like a broken clock being right at least twice a day. It will happen. Until then, the trend is your friend.

Friday, January 8, 2010

This Correlation Still Exists

As you all know, there has been a tight correlation between the US Dollar Index and equities for the better part of 9 months. If the Dollar goes down, then equities go up. Even if there is a hint that the Dollar might go down - let's say, a bad employment report suggesting that the Fed will keep its foot on the monetary pedal even longer- stocks go up. We all have the drill down. The Fed throws us a biscuit, and we all stand up and bark!

Inflation Pressures Heating Up, Again!

The composite indicator that measures the trends in gold, crude oil, and yields on the 10 year Treasury will end the week in the extreme zone, and this should be a headwind for equities. Inflation pressures, whether real or perceived, are heating up. See figure 1 a weekly chart of the S&P500 with the indicator in the lower panel.

Thursday, January 7, 2010

What Could Be The Catalyst?

As the prior post implied, Treasury bonds are at one of those "critical" junctures. If they continue lower (i.e., yields head higher), it would seem to suggest improvement in the economy. If bonds find a bottom and reverse higher, which is entirely possible as well, then the economic outlook still remains a bit murky. Nonetheless, the old adage that the "technicals break with the news" may apply here.

Wednesday, January 6, 2010

Treasury Bonds In The Balance

As I have been chronicling for better than a year now, longer term Treasury yields have a high likelihood of undergoing a secular trend change from down to up. See figure 1 a monthly chart of the yield on the 10 year Treasury (symbol: $TNX.X), which has served as our proxy for the long bond.

Required Reading: "The Biggest Losers"

I have been behind on my reading, and last night I finally had a chance to catch up and read the recent editorial in the Wall Street Journal entitled, "The Biggest Losers".

Monday, January 4, 2010

The Technical Take: Gold ETF

Figure 1 is a monthly chart of the SPDR Gold Trust (symbol: GLD). The breakout (blue up arrows) from the extended base resulted in the strong surge in GLD shares over the last part of 2009. Gold's parabolic move resulted in selling in December, but as long as prices remain above the breakout point, gold and GLD should be bullish. This level of support is at approximately $96.

Currency And Country ETF: Canada

Figure 1 is a weekly chart comparing the Currency Shares Canadian Dollar (symbol: FXC) to the i-Shares MSCI Canada Index Fund (symbol: EWC). As you can see, these two instruments are highly correlated across multiple time frames.

Saturday, January 2, 2010

Investor Sentiment: Tipping Point?

From an investor sentiment perspective there is very little to like about the current US equity market. The "dumb money" continues to be bullish to an extreme. The "smart money" is neutral to bearish. Company insiders continue to be relentless in their selling. The Rydex market timers are their most bullish since mid August. With most investors in the bullish camp, at some point the market will reach its tipping point, and it is my expectation that this will be sooner than later. After all, who is left to buy if everyone is so bullish?

Friday, January 1, 2010

S&P500: Long Term Technical Outlook

Looking out over the next 12 months, my outlook for the S&P500 is bullish. This may surprise many of you as I have had a cautious bent for the better part of six months now, and I have been writing about selling something, anything for the past 6 weeks.